Furman on Social Security
By Arnold Kling
Indexing benefit levels for longevity, the retirement age, or the payroll tax rate goes in the right direction – delivering larger adjustments as people live longer – but only captures a small part of the uncertainty about the future.
One way to introduce more robustness into the Social Security program would be to use dependency indexing which links changes in replacement rates or payroll tax rates to changes in the ratio of workers-to-retirees.
This is part of a broader piece on the long-term fiscal gap. It is well worth reading. Thanks to Greg Mankiw for the pointer.